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The economics of the Digital Transformation – XXVI

Gig Workers have been among the most affected by the pandemic, both in terms of lock down as well as in term of fright that led consumers to avoid certain services, like Uber, Airbnb … As shown in the graphic, 89% of gig workers are looking for a new source of revenue, 68% have been left with no income. Over 70% are unsatisfied, had no support, from the companies that were using their services. At the same time 56% of gig workers would expect some form of support from the government/companies to weather the storm. Image credit: WEF

The Pandemic Impact on the Gig Economy

The recent pandemic hit the Gig Economy and possibly changed its evolution in two main ways:

  1. Emphasised the critical work environment with low societal protection
  2. Boosted the Gig Economy with, possibly, lasting effects

Critical Work Environment

The insecurity of work intrinsic in the Gig Economy is nothing new. People engaging in it have no contractual obligations nor safeguards and sometimes they choose to operate in the Gig Economy for the flexibility it offers. On the other hand, it is fair to recognise that most people, particularly those engaged in menial activities, choose it because they see no other choices. These are the ones most affected by the lack of safeguards.

The growing number of people involved in the gig economy has taken this issue to the fore and there have been calls to address this problem, although it is an intrinsic quality of the gig economy: lack of contractual obligations.

A compounding problem is that in many situations the gig economy is being played “outside” of the government control, leading to a sort of accepted black market where workers do not pay takes and are basically “invisible” to the state.

This has become apparent when the pandemic struck and lock down was imposed to people and business in many areas. The halt to business resulted in a stop to salary for many workers. In turns, the governments, institutions stepped in to provide social security to those workers losing revenues.

Since the gig economy workers were invisible to the state they did not get access to any security net, in spite of having lost their revenue sources.

The crises was compounded by the massive job losses in the classical economy that had many of those workers turning to the gig economy as a way to make some side money. That increased in the space of a few weeks the offer of services further decreasing the value of those offers. Gig workers all of a sudden faced a decreased demand and an increased competition.

As pointed out in a recent World Economic Forum survey – see infographic- gig workers have been hit hard by the pandemic and most of them had not safety net available.

Today most of the gig economy involves menial activities. Tomorrow the availability of platforms to connect higher level capabilities to the marketplace (basically a shift of the consulting world into the gig economy) may change the landscape, although the basic fundamentals of job flexibility will continue to dominate.

These higher level offers may be less affected by a pandemic or other disruptive events but it is not sure at all. The changing business demand experienced by consulting companies (some increasing, other decreasing) may well be mirrored in a future gig economy related to skilled labour.

Gig economy jobs have been affected in different ways by the pandemic. Onone side, as shown in the graphic, the decrease of demand in baby-sitting, cleaning, on the other side the increase in delivery, freelance, online survey (read call centres). Image credit: WEF

At the same time the pandemic affected in quite different ways the various sectors of the gig economy.

Some jobs sharply fell, like cleaning and baby/house sitting. Others increased, most notably those related to goods delivery both in the last mile and from ecommerce. Instacart increased its gig-sales force by 300,000 in North America, Amazon hired 175,000 “associates” for temp works to meet the increased demand.

However, these are transient phenomena. What is more interesting is that the pandemic has accelerated the Digital Transformation is fuelling the gig economy in various ways:

  • The shift to the cyberspace of activities makes it possible to tackle them from almost anywhere under the (autonomous) control of a software platform. This increase flexibility in the use of resources and steer companies into using a flexible work force.
  • The lock down demonstrated that it is indeed possible to perform activities through the cyberspace and in most cases this results in added efficiency for a company. Office space is no longer required (or significantly less is needed) saving considerable money, employees can be monitored much more efficiently, although subtly, since all their activity is digitally tracked. This steers companies into continuing leveraging from remote working and that, in turns feeds the gig economy.
  • Similarly to the previous point, but from the worker perspective, the lock down got rid of commuting time and often led to much more flexible working hours, something that a good percentage of people appreciated. This is changing the perception of work, from going to an office to offer some service, based on knowledge and skill.
  • The loss of jobs forced people to look into alternative jobs, with many of them accepting temporary ones. This helped in creating a flexible attitude towards jobs and to distance the few that still grab on the idea of a job for life from that paradigm.
  • The uptake of job openings as the economy recovers is likely to go through a period of uncertainties and companies will be much interested in hiring that keeps high flexibility. This will push the gig economy into high skilled labour.

As the gig economy will keep expanding both in number of people involved and in the quality of labour some sort of regulatory framework will need to be established to resolve some of the pit falls that became so evident during the pandemic.

In addition, and this is possibly an even more important aspect in the evolution of the gig economy and of the regulatory framework, differently from the classical economy where jobs are basically tied to a location, and therefore mostly subject to local rules (including fiscal/taxation rules) the gig economy, particularly the one involving highly skilled labour, most of the time is location independent. A knowledge worker can sell his ware everywhere in the world from everywhere in the world.

What about a CDT, a perfect player in the future gig economy? It is complete de-materialised, it can work at the same time in many places and create wealth in different ways. Smart contract and blockchain, bitcoins can be the economic transaction fabric of the future.

There are already issues in eCommerce because of different tax regulations, just think about the variety of issues emerging from a knowledge market.

About Roberto Saracco

Roberto Saracco fell in love with technology and its implications long time ago. His background is in math and computer science. Until April 2017 he led the EIT Digital Italian Node and then was head of the Industrial Doctoral School of EIT Digital up to September 2018. Previously, up to December 2011 he was the Director of the Telecom Italia Future Centre in Venice, looking at the interplay of technology evolution, economics and society. At the turn of the century he led a World Bank-Infodev project to stimulate entrepreneurship in Latin America. He is a senior member of IEEE where he leads the Industry Advisory Board within the Future Directions Committee and co-chairs the Digital Reality Initiative. He teaches a Master course on Technology Forecasting and Market impact at the University of Trento. He has published over 100 papers in journals and magazines and 14 books.